Retail supply chains have been in the midst of whirlwind change over the past few years. From rapid changes in customer needs to global and unexpected challenges, the 20s have been a hard time for retail logistics. Our team of retail supply chain specialists have shared their thoughts on what retailers are struggling with right now.
These are the top seven retail supply chain challenges we see:
Changing customer expectations
The average customer of today has vastly different needs from those of even just five years ago. Between increasing demands for deliveries and a stronger focus on the sustainability of a business, new customer expectations have shifted the goalposts significantly for retailers around the world.
Delivery
Amazon and similarly large companies have changed baseline delivery expectations of retail customers. Now free returns and next-day delivery are the minimum requirements to compete. But offering both of those consistently isn’t always feasible for the bottom line. Free returns and rapid delivery often eat up product margins (and then some). There are also rising costs with the prices of fuel and growing logistics complexity. For some retailers, it simply may not be reasonable to include that level of service and they may end up selling at a loss.
Sustainability
In addition to delivery times and costs, consumers have started demanding greener options for getting their goods. Since supply chains and delivery make up the majority of a business’s carbon footprint, this an key area for businesses to create impacts. In fact, Scope 3 emissions can account for anywhere between 65% and 95% of a company’s total emissions.
We have also seen that consumers are willing to spend based on green ideals, which makes supply chain and logistics sustainability an important revenue consideration.
Learn more: Decarbonise your supply chain right now [Whitepaper]
The volatility of shipping
Recent years have proven that container shipping is particularly vulnerable to disruption. Volatility in container shipping costs and its effect on inbound goods has been especially impactful for the fashion industry. Brands whose manufacturing takes place in China have been particularly hit by the complications in that lane.
Many brands have begun shifting toward air freight, though costs there can also be volatile. The variety of ever-changing surcharges and time-consuming shipping processes also contribute to the financial turbulence.
Reliability of single carrier solutions
Brands that have yet to embrace a multi-carrier solution for their logistics are starting to feel the restrictions that not doing so places on them. This reluctance to use more than one provider may come from the assumption of volume-based discounts. Alternatively, brands may steer clear of this strategy based on the misconception that multiple carriers are too difficult to procure and operate effectively.
However, one provider alone can’t be competitive in all lanes and across all volumetric weight bands. That means that, even if you are consistently shipping a high enough volume of goods to qualify for a discount, you are likely still paying more than you need to be.
Learn more: How much can you save by using multiple logistics providers?
The death of 'Just in time'
We know now that ‘Just In Time’ shipping is over and that ‘Just In Case’ shipping is the new model that is needed. Rather than continue the method of holding just enough goods to see a shop or warehouse through to its next delivery, now brands are stockpiling goods to sure that there will be enough to meet demand if something goes awry. This creates an increased need for working capital as well as increases the amount of storage space needed. Both of these factors exacerbate running costs and eat further into margins.
Warehouse property complications
Property prices are skyrocketing for businesses as well as individual consumers. As megacorporations like Amazon continue buying up valuable warehouse space, smaller retailers are being pushed out. This can impact both new brands looking for affordable space and bigger brands that are looking to expand.
For scaling companies, the rarity of affordable warehouse space can make expansion particularly challenging. When looking to move internationally, they’re sometimes faced with the options of spending extra on new warehouse space or shipping from their legacy warehouse. This can lead to operating over capacity and diminishing profit or an inability to meet demand. In these scenarios, it’s important to explore all of the possible options.
Speed of change
High-growth businesses often scale so rapidly that they no longer have the time or resources to secure new, stable contracts with suppliers. This leaves them at the mercy of transport companies and can mean absorbing unnecessary costs. Having difficulty with contracts can come from a gap in skills, knowledge or experience in teams that have grown too quickly.
Read more: How AI helped Thread enter new markets & lower logistics costs [CASE STUDY]
Scenario planning
Prediction models based on historical data are no longer sufficient. Instead, brands need smart scenario planning and real-time data. Whether you’re looking at where the most affordable new warehouse location is or which shipping lanes will be most profitable, being able to simulate those scenarios with real data is key. This is where digital twin technology and AI decision-making tools can really shine.
Read more: What is a digital twin for supply chains?
Retailers everywhere are facing these challenges right now. And, as more disruptions happen, the problems will only become bigger and more painful. Though solving all of them can seem overwhelming, each of these issues really comes down to a matter of data. The better your brand's grasp of its logistics data, the better equipped it will be to overcome the challenges ahead.
Want to find out how your retail supply chain can tackle these challenges quickly? Get in touch with our experts today:
